What is the new normal unemployment rate

Abstract

Recent labor markets developments, including mismatches in the skills of workers and jobs, extended unemployment benefits, and very high rates of long-term joblessness, may be impeding the return to \\"normal\\" unemployment rates of around 5%. An examination of alternative measures of labor market conditions suggests that the \\"normal\\" unemployment rate may have risen as much as 1.7 percentage points to about 6.7%, although much of this increase is likely to prove temporary. Even with such an increase, sizable labor market slack is expected to persist for years.